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Informist, Saturday, Dec. 7, 2024

 

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--Axis Bank Gambhir: Domestic bond yields will remain stable going forward 
--Axis Bank Gambhir: More volatility expected in FX market going forward 
--Axis Bank Gambhir: Strength of RBI intervention may come down 
--CONTEXT: Axis Bank treasury head Neeraj Gambhir at Rupee Money Conference
--Axis Bk Gambhir:Just stabilising currency may not aid internationalisation   
--ICICI Bank Prasanna: Rupee may see 85-86 a dollar level early next year 
--ICICI Bank Prasanna: Need to be prepared for depreciating rupee 
--ICICI Bk Prasanna: Would definitely want RBI to intervene less in FX mkt 
--CONTEXT: ICICI Bank global mkts head B Prasanna at Rupee Money Conference
--ICICI Bank Prasanna: Would want more volatile, flexible rupee 
--CONTEXT: Union Bank CGM-Treasury Sudarshana Bhat at Rupee Money Conference 
--Union Bk Bhat: India 10-year G-Sec yld seen at 6.50-7.00% next 6 months 
--Union Bank Bhat: Rupee will be on gradual depreciation mode

 

MUMBAI – The Reserve Bank of India should intervene less in the foreign exchange market and let the rupee be a little volatile and flexible, Prasanna Balachander, head of treasury, ICICI Bank Global Markets Group, said at the Rupee Money Conference Saturday. "If you have a very stable currency, if you do not let the universe of equilibrium play, it will have its impact and I think the (US president-elect) Trump trade you know kind of engineered it. So, I would say I would definitely want them to intervene less...personally, would definitely want them to intervene a little less in the FX market," Prasanna said.

 

The RBI has maintained a strong grip on the foreign exchange market to support the rupee in the face of outflows and geopolitical tensions. "Our overall approach ensures that forex reserves act as shock absorbers, safeguarding the economy from external spillovers, while supporting competitive and orderly market conditions," Reserve Bank of India Governor Shaktikanta Das said, while detailing the monetary policy outcome on Friday. 

 

Prasanna said the market needs to be prepared for a depreciating rupee, and added that the Indian currency might fall to 85-86 a dollar in the next six months. "I am saying that we need to be prepared for depreciating rupee, and we need to be prepared for an RBI that is more open to now depreciating because they have probably seen the inevitability of trying to stop the depreciation... I don't think internally also there is a desire to keep the rupee strong at all," he said. The rupee has depreciated sharply since Donald Trump won the presidential election in the US. His administration is said to be associated with a strong dollar and the imposition of tariffs, which are inflationary in nature. 

 

Speaking at the same event, Neeraj Gambhir, group executive and head - treasury, markets and wholesale banking products at Axis Bank Ltd., said he expects less intervention from the central bank going forward. He, too, expects some more volatility after Trump assumes the US presidency in January. "The depreciation bias will be there and the pace of intervention or the strength of intervention can actually come down from here, so we might see more volatility as we go forward," Gambhir said.

 

Sudarshana Bhat, Union Bank's chief general manager-treasury, said he expects the rupee to depreciate from here. "The Federal Reserve is going to cut the interest rate in the next one year by 250 points. That means the emerging market will definitely get inflows in the form of equity, bonds, or direct investments and all. That will give a positive run-in to the currency as well as the bond market," Bhat said. 

 

Gambhir also spoke about the central bank's intent to internationalise the rupee by keeping it stable. A stable currency alone couldn't be a factor for its internationalisation, he said. "Just the stability of currency is not a necessary and sufficient condition. You do require an open capital account for a currency to start becoming an internationally acceptable currency." 

 

He also spoke about the limitations of holding the rupee as a currency for foreign investors. "Why should anybody hold rupees if all that they can do with rupees is to buy government bonds? They need to be able to buy real assets, buy real goods. So, yes, less volatility of currency helps, but will it go all the way in terms of creating an internationally acceptable currency? I think it's a bit of a question mark," Gambhir said. 

 

When it comes to the bond market, all the three treasury heads said they expect yields to remain fairly stable in the coming six months. Bhat said the yield on the benchmark 10-year Indian government bond would trade between 6.50% and 7.00% in the next six months.  End

 

Reported by Kabir Sharma and Gowri Lakshmi

Edited by Avishek Dutta

 

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